10 Biggest Online Failures And What We Can Learn From Them

Making money online has not always come easy, one of the main reasons is because it was so misunderstood.

Online business was a new business medium, and no matter how much money you were prepared to spend it didn’t guarantee success.  In fact, some still ‘wet behind the ears’ college graduates with little to no money to put up have had more success than corporate giants with untold millions at their disposal.

Here are some of the most noteworthy failures:

1. The power of running an online business became so intoxicating to a Californian online grocer Webvan, that he will be held up for years, as an example of why you shouldn’t grow your business ahead of its demands.

Webvan raised $375 million in just 18 months and expanded its online grocery ordering business to nine American cities and began building massive infrastructure. Money became no object as the dream lived.

Its shareholding eventually grew to over $1 billion and it planned further expansion into a further 26 cities.

What wasn’t considered however was the grocery trade’s very narrow profit margin and before it could sell all its merchandise it had to have customers. When it closed in 2001 after only lasting two years it put 2,000 people out of work.

2. We all know that teenage girls like being online so when Kibu.com announced its presence on the web with content and chat rooms aimed at 13 to 18-year-olds, it sounded like a sure bet to everybody, especially the organizers.

The idea sounded so good it raised $22 million to see it on its way and nobody at the glittery launching has any idea it was only going to last 46 days. Its backers nervously pulled the plug stating that the timing was wrong.

Their decision sent a valuable message to other entrepreneurs to be wary of getting start-up funds from Silicon Valley big shots.

3. Most people will still risk anything in order to secure big celebrity endorsements, but this didn’t help MVP.com who created a business selling sporting goods online.

With the backing of $65 million in the bank and stars like Michael Jordan, John Elway, and Wayne Gretzky vouching for you, who could go wrong?

MVP.com grew to employ over 150 people then signed a four-year contract worth $85 million with CBS and SportsLine.com. But big partners are not always nice and a falling out saw MVP.com fall over and get completely swallowed up by SportsLine.com.

4. Another important business lesson to be learned has been given to us by Pets.com.

This online business model showed us that clever advertising does not always work. Pets.com had a talking mascot that was nothing more than a sock puppet but it became so accepted in the community it appeared in a multimillion Super Bowl commercial as well as making other high profile appearances.

Although everybody in the country was exposed to the little sock puppet they never ordered its products online in any great number. It was slow to deliver and its price-cutting made its profit margin non-existent. Big advertising has to be backed up with good service.

5. Kozmo.com was a good idea that needed more than just an idea to get it running properly. It lacked research. Kozmo.com sold and delivered a wide range of products, anything from snack food to movies and they wanted to deliver to your door for no charge inside of an hour.

What they didn’t take into account were that delivery costs. They held out for a while, even expanding into seven separate cities and employing over 1,000 people. Its promotional deal with Starbucks kept it going for a while but there wasn’t money to be earned delivering a DVD and a sweet for nil.

6. Boo.com was a U.K. online fashion business. Its main problem was its management and website that was far too complicated for many online shoppers to handle with any confidence. It was slow loading and at a time when dial-up was the accepted practice, its slowness was made even more noticeable.

It went through $160 million dollars before they called it quits but has since been given a new life under the domain name of Fashionmall.com.

7. Flooze.com was an idea that sought to put a stopper on the need for credit cards. The idea is that after buying a number of Flooze.com items you could use it to buy from other retail partners. Much like how a merchant’s gift card works.

The problem was it was much more cumbersome than simply using a credit card. It didn’t take off despite raising $35 million from investors who didn’t do their research either.

8. Etoys, which is now back operating its online business, had a shaky start in its original format. Starting a life with $166 million up its sleeve its shares dropped from a high of $84 to low of 9 cents in just 17 months. It suffered because of too much advertising that didn’t turn into sales.

9. Disney even had a crack at online business with Go.com. In its original format, Go.com was going to be a destination site like Yahoo but it suffered from restricting its service to family-friendly web sites only.

It never took off and Disney finished up losing $790 million in the process. It still survives however but is only linked to other Disney products these days.

10. Two childhood friends got their heads together one day to come up with the idea of online business to make it easier for ordinary citizens to transact business with municipal councils. So they launched the website Govworks.com.

They were riding high, living the high life and spending millions of dollars each, but when things started to go wrong they started infighting, one partner was asked to leave and certain components of their technology were reported stolen. They were soon taken over by a competitor.

These are important lessons to be learned from would-be entrepreneurs who have had millions of dollars at their disposal and still mucked it up when embarking on an online business. All these people have one thing in common. They were all too anxious to be successful without putting in the hard yards.

They all felt that an online business meant people rushing to your site to throw money at you. It doesn’t work like that, no business does. Just like everything else, to be successful you have to earn trust and earning trust takes time.

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